Big trends driving commercial lending

by AB08 Jun 2020

The MFAA’s most recent Industry Intelligence Service (IIS) report, released in April 2020, shows that the number of mortgage brokers writing commercial loans as well as residential mortgages had increased to a fresh high of 3,670 by September 2019.

The uplift suggests that “in a challenging home loan market, more brokers are turning to diversifying into this sector, expanding their portfolio beyond just residential home loans into other growth sectors”, the report found.

This promising growth in the commercial space seemed set to continue well in 2020 – until the COVID-19 pandemic hit, that is.

“Our credit decision engine analyses over 450 unique data points in around 15 seconds ... and a response and funding are possible in 24 hours”

The commercial lending market has been one of the hardest hit by the pandemic. However, Beau Bertoli, co-founder and chief revenue officer at Prospa, says the biggest trend driving SME and commercial lending right now is digitisation.

“Microsoft research signals there has been two years’ worth of digital acceleration in a couple of months. Government support has boosted awareness of non-bank lenders like Prospa and accelerated the adoption of digital products and services,” he says. “Small business customers, brokers and lenders are all operating in this new environment, and speed, simplicity and great service are now more important than ever.”

Indeed, brokers have embraced the rapid shift towards adopting more flexible ways of working, including virtual verification of identity processes that have the potential to speed up the financing of property.

Of course, for Prospa, speedy turnaround times have long been part of its core offering.

Beau Bertoli, co-founder and chief revenue officer, ProspaBeau Bertoli, co-founder and chief revenue officer, Prospa

“Our online applications take 10 minutes, and our credit decision engine analyses over 450 unique data points in around 15 seconds. We’re committed to lending responsibly, and a response and funding are possible in 24 hours,” Bertoli says.

“We just had a tiling business client in Victoria who used a loan to cover upfront costs for a big renovation project. He had to move quickly to get the order in from overseas and say yes to the opportunity. That speed is a huge relief for customers that want to get back to business.

”Bertoli adds that, as a fintech, Prospa is well placed to face the evolving challenges of the current market. The depth and breadth of its ability to offer funding can provide solutions across a range of finance types, from those small businesses that require funding to help with cash flow, to equipment and vehicle finance, machinery or business car loans and business overdrafts. Prospa can meet the borrower’s needs in a variety of ways, with products and interest rates tailored to the client’s specific risk.

“We’re agile and can adapt quickly. We use smart technology to assess risk, so we can continue to deliver a fast response in the current environment,” Bertoli says.

“Small businesses are navigating an uncertain time right now, and a quick application and decision means they can focus on getting back to business. We’re also a cloud-based business, and our team can provide the same level of customer and partner support working remotely.”

Propsa back to business loan and line of credit: termsWhile current conditions may be challenging, there are also plenty of reasons to be optimistic about the future. The value of commercial loans settled by brokers peaked at around $9bn in April–September 2019, according to the IIS report, with the total book value of commercial lending by mortgage brokers reaching a record high of $43.1bn.

“The future is going to look different, and the brokers that win in this new market will be the ones that are agile and can adapt”

Programs such as the government’s Coronavirus SME Guarantee Scheme, in which Prospa is participating, should put a foundation under commercial loans while the scheme is in operation – until September this year. Furthermore, they will go a long way towards raising small business awareness and consideration of non-bank lenders in the future.

Propsa back to business loan and line of credit: eligibility criteria“There is a lot of energy and enthusiasm from the broker community around the inclusion of non-bank lenders like Prospa in the scheme. It’s great to have this support, and we’re working closely with partners to responsibly distribute funding quickly to small businesses. We’ve started rolling out our new Back to Business loan and Line of Credit products under the scheme, and these will be widely available to partners soon,” Bertoli says.

Prospa offers loans of up to $250,000 under the SME guarantee and $300,000 more broadly, and is seeing a strong appetite for funding from a range of businesses.

“Recently there’s been strong appetite from businesses that have been able to end hibernation earlier than expected and are thinking positively and proactively about their recovery,” he explains.

“There are also businesses in certain industries that are experiencing increased demand for products and services and need funds to support growth. In addition to this, we’re seeing demand from otherwise viable businesses experiencing temporary cash flow issues due to COVID-19 that need funding to get them through this period.”

One of the biggest advantages Prospa offers SMEs right now is its speed of service, he adds. At a time when brokers are struggling with lenders that are taking several extra weeks to process even the most straightforward commercial loan applications, Prospa remains able to deliver decisions within 24 hours – with funds available just as swiftly.

“We know small business owners don’t have time to fill out masses of paperwork or wait six weeks for a response. We offer a simple online application and use smart technology to deliver a fast credit decision, which is what small businesses need right now. They need to be able to make their next move,” Bertoli says.

“Looking ahead, one of the greatest opportunities we see is in the digital acceleration that has taken place. The future benefits for productivity, efficiency and communication are huge.

“Everyone is operating in a digital world right now, and this is an opportunity for brokers to re-evaluate how they run their business and deliver their services. I encourage brokers to consider investing in cloud-based solutions that can help them scale and deliver a seamless customer experience. The future is going to look different, and the brokers that win in this new market will be the ones that are agile and can adapt.”

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